Charter Corp. has issued 2,500 debentures with a total principal value of $2,500,000. The bonds have a

Question:

Charter Corp. has issued 2,500 debentures with a total principal value of $2,500,000. The bonds have a coupon interest rate of 7%.

a. What dollar amount of interest per bond can an investor expect to receive each year from Charter?

b. What is Charter’s total interest expense per year associated with this bond issue?

c. Assuming that Charter is in a 35% corporate tax bracket, what is the company’s net after-tax interest cost associated with this bond issue?

Debentures
Debenture DefinitionDebentures are corporate loan instruments secured against the promise by the issuer to pay interest and principal. The holder of the debenture is promised to be paid a periodic interest and principal at the term. Companies who... Coupon
A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from issue date until maturity. Coupons are usually referred to in terms of the coupon rate (the sum of coupons paid in a...